Main menu

The East Bay Permanent Real Estate Cooperative

The East Bay Permanent Real Estate Cooperative is an impressive burgeoning commons legal institution that's aimed at the decommodification of housing. It is pioneering a new legal institution for how we can own homes more equitably, collaboratively, and in such a way that they're permanently off the speculative market.

The cooperative combines features of community land trusts, housing cooperatives, real estate investment cooperatives, and the California Cooperative Corporation. It has swiftly transformed into a growing movement for affordable housing led by people of color. How does this new model combine the best features of each legal institution discussed in my last piece, which looked into community land trusts, housing cooperatives, and real estate investment cooperatives?

The folks at the Sustainable Economies Law Center [Shareable's editorial partner] and the People of Color Sustainable Housing Network, the incubators for the cooperative, understood the necessity of building something different from existing legal institutions to address the crisis of affordable housing. At the same time, they were keen on learning from and building on the outcomes of past models. They appreciated how community land trusts and limited equity housing cooperatives remove housing from the speculative market and place restraints on transfers at below market rate, effectively capping the ability to make money off of home sales to reasonable rates of equity. However, they felt that restricting this to only low and moderate income households was too limited. They sought to change the way that everyone, regardless of their income level, thought about housing, especially the idea of housing as vessels for investments.

Janelle Orsi, executive director and cofounder of the Law Center, provided a constructive alternative in a piece written in 2016. Orsi wrote that "everyone – high-income and low-income – should stop profiting from property and live in limited equity housing." Limited Equity housing takes the form of legal restraints on sales of homes at below market value, capping equity earned as a reasonable percentage anywhere from 1-25 percent tracking such indexes as the consumer price index or area median income.

Equity in homes can act as the basis of a radical new form of shared wealth — what I will call "solidarity equity." "Solidarity equity" assumes that equity is about growing wealth in a way that is fair or equitable for everyone. Because equity is a relational concept, it requires a community driven process of engaging one another democratically in the pursuit of a common vision of what fairness requires, as well as a commitment not to sell out that common vision.

The East Bay Permanent Real Estate Cooperative's vision was to create a multi stakeholder housing and worker cooperative in the pursuit of economic democracy. Housing cooperatives use self-determination to limit speculative gains, and worker cooperatives are committed to the equitable division of profits by giving everyone a voice and a vote, not just the residents. As a result, the East Bay Permanent Real Estate Cooperative functions in part like both: It is democratically controlled and profits are paid out in dividends according to levels of "patronage" which, put in simple terms, is a measure of the person's participation. Like a limited equity housing cooperative, it limits the amount equity earned thus removing homes from the specultive market. Participation in the cooperative can take the form of: (1) a "consumer" of East Bay Permanent Real Estate Cooperative's services (this might be a community stakeholder or community owner) who participates in the community and in seminars and workshops put on by the cooperative, or (2) a worker (staff owners) who participates with their labor, or (3) a resident who lives in one of the cooperative's units (resident-owners).

Investors are also part of the model. In a California Cooperative Corporation this group of patrons have more limited power vis-à-vis worker patrons and resident patrons. This is the polar opposite of regular corporations where the bottom line of shareholders is the driving factor of decision making within the corporation. Investor owners are only entitled to a fair rate of return of 2 percent or possibly slightly more. By capping returns, the incentive structure around both investing and decision making internal to the corporation is altered to support community: for investors, it's not about profit but about the impact they believe they are making with their money in the community and in furthering the aim of social justice.

So where does the money come from if not from squeezing productivity and cost margins? The East Bay Permanent Real Estate Cooperative within the California Cooperative Corporation framework, unlike a community land trust and like a permanent real estate investment cooperative, has the unique ability to raise capital ($1,000 per individual). The cooperative may initially use gift capital to acquire the first properties, but will then leverage that to launch an impact investment and micro-investment campaign at the end of this year to assist individuals to acquire bank loans, which will make the model quickly self-sustaining. As Chris Tittle of the Law Center says "sourcing capital directly from the community itself democratizes capital and grows community wealth by providing an opportunity for the 90 percent of us who can't usually invest directly in businesses to participate."